202 Misc. 130 | N.Y. Sur. Ct. | 1952
Investment problems that have arisen in the course of the estate administration require construction of deceased’s will. The fourteenth clause of the will authorizes the trustees to hold investments made by the testator. The fifteenth clause of the will provides: “ I hereby authorize and empower my said executors and trustees, the survivor of them or the one alone qualifying as such from and after such time as by sale of assets permitted to be held under the foregoing paragraph there shall remain no greater proportion of the principal of any trust herein created than twenty-five per cent of the amount thereof invested in investments other than such as are prescribed by law, to make such investments with funds of my estate as in their judgment may be advisable without being limited or restricted to such investments for trust funds as are prescribed by law, provided that in no event shall a greater proportion of the principal of any trust herein created than twenty-five per cent of the amount thereof be thereafter invested in investments other than such as are prescribed by law and provided further that such investments, if any, shall be limited to preferred stocks, bonds or other securities of corporations which have continuously declared and paid interest or dividends for at least five years prior to such investment, upon their securities next subordinate thereto. ’ ’
One question of construction concerns the applicability of paragraph (m) of subdivision 1 of section 21 of the Personal Property Law to the terms of this will. That statutory provision authorizes trustees to invest, within a stated limitation, in the corporate securities described in the statute. It has been held that the statute permits the investment of as much as 35% of a trust fund in the corporate securities defined in the statute provided the balance of the fund is not invested other than in the particular legal investments mentioned in subdivisions (a) through (l) of subdivision 1 of the statute (Matter of Peck, 199 Misc. 1051). The position of the trustees in this proceeding is that, by reason of the authorization in the fifteenth clause of the will which permits reinvestment of not more than 25% of the fund in specified nonlegals, the trust estate is divisible for investment purposes into two distinct funds and, in applying paragraph (m) of subdivision 1 of section 21 of the Personal Property Law, the 25% of the fund which may be invested in nonlegals pursuant to the authority contained in the will is to be disregarded in computing the percentage of the estate that may be invested under paragraph (m). This reasoning would allow the trustees to invest 25% of
The parties herein are in agreement that shares of preferred stock of R. H. Macy & Co., Inc., received upon a recapitalization of the corporation, are to he held in principal account. The court concurs in the conclusion that the distribution of such shares did not constitute the payment of a stock dividend and that the crediting of such shares to income account would effect an unjustifiable dilution of trust principal. The nineteenth article of the will does not provide that shares of stock received on such a recapitalization be regarded as stock dividends payable to the income beneficiary.
Testator owned shares of stock of a public utility holding corporation and such shares passed into the hands of the trustees herein. Pursuant to the requirements of the Public Utility Holding Company Act (U. S. Code, tit. 15, § 79 et seq.) a plan for the dissolution of the holding company was approved by the Securities and Exchange Commission and the United States District Court. Under such plan of dismemberment the shares of the parent corporation were exchanged for shares of the subsidiary corporations and some cash. The trustees inquire as to whether or not they may retain such substituted securities. Concededly the fourteenth article of the will authorizes the trustees to retain securities purchased by the testator. A question now arises only because of the alteration in the form of the investment, whether or not the change was a material one. Matter of Westerfield (193 Misc. 443, mod. 278 App. Div. 153, affd. 303 N. Y. 916) was concerned with the effect of the dissolution of a public utility holding company. There the primary question was whether or not a testamentary mandate to retain the deceased’s investments applied to shares of subsidiary corporations received in lieu of the shares of the holding company. The courts held that the dissolution effected a material change in the investment which made the direction to retain inapplicable to the substituted securities. The secondary question in the case was whether or not subdivision 6 of section 21 of the Personal Property Law authorized the trustees to retain the substituted securities. The statutory provision exonerates a fiduciary from liability for loss incurred by the retention of ineligible investments received pursuant to the terms of a will provided the fiduciary exercises due care and prudence in the disposition or retention of the investment. It was held in Matter of Westerfield (supra) that, despite the material change in the original investment, the securities were received pursuant to
Submit decree on notice construing the will and settling the account.